US-China trade war intensifies as punitive tariffs kick in

BEIJING: The US and China escalated their acrimonious trade war on Thursday, implementing punitive 25 percent tariffs on $16 billion worth of each other’s goods, even as mid-level officials from both sides resumed talks in Washington.
The world’s two largest economies have now slapped tit-for-tat tariffs on a combined $100 billion of products since early July, with more in the pipeline, adding to risks to global economic growth.
China’s Commerce Ministry said Washington was “remaining obstinate” by implementing the latest tariffs, which kicked in on both sides as scheduled at 12:01 p.m. in Beijing.
“China resolutely opposes this, and will continue to take necessary countermeasures,” it said in a brief statement.
“At the same time, to safeguard free trade and multilateral systems, and defend its own lawful interests, China will file a suit regarding these tariff measures under the WTO dispute resolution mechanism,” it said.
President Donald Trump has threatened to put duties on almost all of the more than $500 billion of Chinese goods exported to the US annually unless Beijing agrees to sweeping changes to its intellectual property practices, industrial subsidy programs and tariff structures, and buys more US goods.
That figure would be far more than China imports from the US, raising concerns that Beijing could consider other forms of retaliation, such as making life more difficult for American firms in China or allowing its yuan currency to weaken further to support its exporters.
Trump administration officials have been divided over how hard to press Beijing, but the White House appears to believe it is winning the trade war as China’s economy slows and its stock markets tumble.
“They’re not going to give that up easily. Naturally they’ll retaliate a little bit,” US Commerce Secretary Wilbur Ross said on CNBC on Wednesday at a Century Aluminum smelter in Hawesville, Kentucky.
“But at the end of the day, we have many more bullets than they do. They know it. We have a much stronger economy than they have, they know that too,” Ross said.
Economists reckon that every $100 billion of imports hit by tariffs would reduce global trade by around 0.5 percent.
The tariffs took effect amid two days of talks in Washington between mid-level officials from both sides, the first formal negotiations since US Commerce Secretary met with Chinese economic adviser Liu He in Beijing in June.
Business groups expressed hope that the meeting would mark the start of serious negotiations over Chinese trade and economic policy changes demanded by Trump.
However, Trump on Monday told Reuters in an interview that he did not “anticipate much” from the talks led by US Treasury Under Secretary David Malpass and Chinese Commerce Vice Minister Wang Shouwen.
Trump has rattled Beijing, and spurred rare criticism within the highest levels of China’s ruling Communist Party over its handling of the trade war, sources have said.
Beijing has denied US allegations that it systematically forces the unfair transfer of US technology and has said that it adheres to World Trade Organization rules.
The official Xinhua news agency said in a commentary on Thursday that China had approached the latest round of talks in good faith, but that Washington remains vague about what it wants.
“As US President Donald Trump said in his book on making deals, ‘the point is that you can’t be too greedy.’ The two sides (would be wise to)
define their top concerns in this round of talks and outline a roadmap, in a bid to find a way out of the current impasse and toward the final settlement of the issues.”
Washington’s latest tariffs apply to 279 product categories including semiconductors, plastics, chemicals and railway equipment that the Office of the US Trade Representative has said benefit from Beijing’s “Made in China 2025” industrial plan to make China competitive in high-tech industries.
China’s list of 333 US product categories hit with duties includes coal, copper scrap, fuel, steel products, buses and medical equipment.

Zimbabwe devalues currency to tackle economic crisis

Zimbabwe adopted the dollar in 2009 but introduced a parallel system of bond notes that it pegged at 1:1 to the US currency

Updated 6 min 20 sec ago

Reuters

February 22, 2019 11:41

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HARARE: Zimbabwe’s central bank began trading a sharply discounted replacement currency on Friday, attempting to ease a cash crunch that has hobbled the economy and plunged millions deep into poverty.Zimbabwe adopted the dollar in 2009 but, as a chronic hard currency shortage worsened, introduced a parallel system of bond notes that it pegged at 1:1 to the US currency.Effectively reintroducing a national currency, the Reserve Bank of Zimbabwe (RBZ) said on Wednesday it would carry out a “managed float” of the surrogate, which fetches far less than a dollar on the black market.The bond notes and electronic dollars, locked in individuals’ accounts for months due to a lack of cash, will be merged into a separate currency called RTGS — or real-time gross settlement — dollars, the central bank said.It sold US dollars to banks at 2.5 RTGS dollars on Friday morning, Bank Governor John Mangudya told business leaders.Commercial banks reopened on Friday after a bank holiday, but with exchange facilities from bond notes to US dollars at the same 2.5 rate limited to individual and corporate holders of foreign currency accounts, queues outside appeared to be no longer than usual.Other members of the public should, in theory, be able to go to banks on Monday and buy US dollars with bond notes or electronic dollars.But it is not clear how many US dollars the central bank, which only has enough foreign exchange for two weeks of imports, has sold to banks.The bond notes and notional electronic funds have plummeted on Zimbabwe’s black market in recent months to around 4 per dollar.Many foreign traders have stopped accepting bond notes as legal tender, leaving businesses such as millers, brewers and miners hamstrung.Economists cautiously welcomed the central bank’s decision to allow its currency to devalue.The RBZ hopes its new measures will temper demand for dollars on the black market and ease inflation as the new currency settles at fair value.